220.127.116.11. Phase 1 Tools: Customers
Boston Consulting Group Matrix
Identifying the best market segments for a particular value chain is challenging, yet an absolutely critical step in formulating a competitiveness strategy. Ideally, value chain projects should start from the customer or market and move backwards to configure the entire industry to serve and even anticipate the needs of chosen market segments.
A useful first stop in towards understanding customer needs is the integration of the Boston Consulting Group (BCG) matrix with data from the ITC’s Trademap database. The graphic below provides an overview of the original BCG matrix. The basic idea behind this matrix is that all companies should have a portfolio of products or business units based on the product life cycle or the combination of current market share and growth rates.
A useful way to integrate the thinking behind the BCG matrix with selecting target markets is to use ITC TradeMap data to create the charts below. Although the axes are slightly different from the original matrix, the layout does allow for choices to be made among markets with distinctly different characteristics. The graphic below shows how this dataset can be used to tell a rich story about global commodity markets and can give some clues about where large, high-value and / or high-growth markets can be found. The three key elements of this chart are:
- Bubble size: The size of the bubble represents the import value of each country listed on the chart. A larger bubble means higher imports.
- X-axis: Average annual growth rate of each country listed from 2002 to 2006. The vertical dashed line represents the global average growth rate.
- Y-axis: Average price paid per ton of raisins in 2006 based on assessed value at the country of destination. The horizontal dashed line represents the global average price.
The findings of this type of chart should be combined with information regarding current markets gleaned from interviews with local players or international experts who can both confirm export patterns and some initial peculiarities of the each major market. Based on the preliminary discussions that the team had with Afghan exporters, a few key points regarding potential target markets came out of this analysis:
- UK: As the largest importer in the world (17 percent of global imports) and with its previous history as a consumer of Afghan products, it is probably worth pursuing. Higher than average prices but lower than average growth classify it as a “cash cow” in BCG parlance.
- India: Relatively small overall, but higher than average import price and growth rate make it a “star” in BCG classification. Current business with India and historical ties also strong.
- Russia: Currently the largest consumer of Afghan raisins by volume, but average prices (and those paid to Afghan exporters) are not attractive. High growth rates could indicate an opportunity for identifying and activating an attractive segment in broader market.
Raisin Importers, Top Five Global plus Afghan Target Markets by Value, 2006
A review of selected reports on the target value chain is critical for understanding the global marketplace in terms of requirements of current and future attractive market segments. Effective ways to identify these reports include simple Internet searches, specialized organizations (USDA or World Tourism Organization) or international donors (USAID, World Bank). This type of research will typically yield a few key trends that the value chain can take advantage of or protect itself against.